Our ability to attend and interact successfully with our surroundings waxes and wanes, as we transition between alert and drowsy states. These states are, in turn, represented as distinct patterns of electrical activity in the cortex. In particular, enhanced vigilance is correlated with activated, desynchronized cortical network activity. Cholinergic cells in the nucleus basalis, through the activation of muscarinic acetylcholine receptors in the cortex, are thought to provide the 'energizing' influence that mediates the transition to this activated state. Such transition is crucial to our improved ability to rapidly handle changing task demands. Importantly, this neuromodulatory system degenerates or malfunctions in the context of neurological disorders, such as Alzheimer's disease and schizophrenia, thus potentially compromising the synchronizing, oscillatory properties of neocortical circuits and their role in higher order cognitive abilities. How does nucleus basalis activation and associated acetylcholine release alter cortical states? Understanding the neural mechanisms of cortical state transition has been a central goal of neuroscientists for decades, and is of crucial importance to understand the pathophysiological basis of numerous neuropsychiatric disorders affecting attention and memory, and to develop appropriate treatments. The search for the neural substrates and mechanisms of cortical state transition has been mostly studied by isolating cellular and synaptic effects through electrophysiological recordings in brain slices following bath or locally applied muscarinic receptor agonists. This reductionist approach has revealed that muscarinic signaling can increase or decrease cellular activity, as well as increase or decrease synaptic efficacy in a cell type- specific fashion. However, when integrated together, the effects of ACh on cortical neurons and synapses appear paradoxical and inconsistent. If all of the observed cholinergic muscarinic actions occurred simultaneously they would lead to contradictory effects on cortical circuits. I hypothesize that the dynamics of ACh release in the cortex coordinates in time this diversity of cellular and synaptic effects in order to give rise to the activated state. I will test this hypothsis in the context of cholinergic modulation of cortical neurons and networks during the natural state transitions that occur when an animal is awake. To tackle this problem, I have developed an optogenetically assisted method and will employ it to record from cholinergic cells in the nucleus basalis, as they become active and exert modulatory influences on cortical dynamics. I will also employ this method to explore ACh effects on identified GABAergic interneuron subtypes in the cortex, as the network transitions to the activated state. Finally, I propose to employ cell-type-specific genetic ablation of specific muscarinic receptors to subtract independent cholinergic effects, in order to investigate their contribution to the transition, maintenance, and properties f the activated cortical state.